Contrast the factors that underlie the down sloping resource demand curve with those which underlie the down sloping product demand curve
What will be an ideal response?
The down sloping resource demand curve is related to the resource’s MRP schedule. A firm will hire additional units of a resource as long as each successive unit adds more to the firm’s revenue than it does to its costs. The factors behind the MRP curve’s down sloping include diminishing returns to a factor of production as successive amounts are added in the short run, and the fact that the demand for the product produced is down sloping also causing marginal revenue to decline as successive product units are produced. The down sloping product demand curve is thus one factor in the down sloping resource demand curve and the factors which cause the product demand curve to slope downward are the income and substitution effects. Since resource demand is a derived demand, these factors indirectly affect the shape of the resource demand curve.
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Checks are NOT money because they
A) are issued by banks, not by the government. B) are merely instructions to transfer money. C) have value in exchange but little intrinsic value. D) are not backed by either gold or silver.
When economists say that market equilibrium is consistent with economic efficiency, they mean
a. the total gains from trade (the combined area of producer and consumer surplus) are smaller than potentially could be the case at a different price and quantity. b. all units creating more benefit than cost have been produced. c. some units have been produced that cost more than the benefits they create. d. consumers and producers have made decisions without properly taking into account the market price.
Refer to Table 5.1. Andrea has a comparative advantage in the production of
A) bracelets. B) tiaras. C) both products. D) neither product.
A problem with the CPI is the presence of a substitution bias on the behalf of consumers
Indicate whether the statement is true or false